Oil Companies Threaten to Ground Air India

The air is becoming thinner for the Indian carrier.Oil companies in India have threatened to stop selling jet fuel to debt-ridden national carrier Air India unless it clears its fuel bill on a daily basis even as the national carrier’s
dues to oil companies have crossed Rs 5,000 crore (US$692.8 million), the Economic Times (ET) reported, quoting several people familiar with the development.

Pay the fuel bill or be grounded. Pictured here is an Air India A320 being refueled.

An oil ministry official said the airline has not been making its daily fuel payment in full for the past one and half years now. A senior Air India official said the recent increase in jet fuel
prices has added to the situation. “We are speaking to oil companies on the issues and it is being resolved,” the person said.
The ET report said that oil companies have also asked the airline to come up with a firm plan to clear their dues. “Air India is a PSU (Public Sector Undertaking - ed) and that's why we are
continuing to supply. Had it been a private firm, we could have already stopped the supply,” a senior executive at a state-run oil company said.

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Generous state aid
After the government’s plan earlier this year to divest its 76% stake in Air India failed, the airline had asked the government to release around Rs 2,000 crore (US$277.2 m) in the interim to
stabilise the airline.
The government has already infused about Rs 980 crore into the airline as equity and granted the airline a sovereign guarantee to raise Rs 2,000 crore from banks. Out of this, Air India has
already raised Rs 1,500 crore and can raise Rs 500 crore more. “The airline can raise that Rs 500 crore and pay a part of it to the oil companies,” the ET report quoted an official as
saying.

Assets are hived off
In a related development, the government of Narendra Modi plans to soon initiate the sale of at least four subsidiaries of the loss-making carrier, including Airline Allied Services Ltd (AASL),
Hotel Corporation of India (HCI), Air India Air Transport Service Ltd (AIATSL) and Air India Engineering Service Ltd (AIESL).
While AASL, under the name Alliance Air, provides regional air connectivity, HCI owns and operates two hotels in Delhi and Srinagar, among others. AIATSL provides ground handling and cargo
handling services, while AIESL is involved in maintenance, repair and overhaul of engines.
In addition, the government is considering selling the headquarter building of Air India in New Delhi as well as various other land assets and buildings of the airline in different parts of the
country.
Press reports said that the government has prepared a list of the airline's assets that could be hived off as part of the strategic sale plan for Air India and its subsidiaries.